I was recently hornswoggled into teaching a small class for my church, of course on economics. The organizers gave me wide latitude on the particulars. They asked simply that I talk about something I know a lot about. So, I ran a small focus group of my mom and my wife. They convinced me that the nexus of both things that I know about and what might be interesting to this group is a good bit smaller that I’d expected. So, mumbling something about the dark persuasive arts of the Methodists, I went about learning something about the economic history of Muncie. In the process, I learned something that most Hoosiers would benefit from reading about. So here it goes...

Western settlement of Indiana really took off between 1800 and 1815. Prior to that, few settlers moved inland from rivers that marked the strategic locations of the French and Indian War (Terre Haute, Louisville, etc.). My family and that of my wife comprised part of that exodus of Revolutionary War veterans moving to what would become Madison, Rome, Blue Lick and, for the adventurous, as far north as Shoals. The places these settlers chose were farms, a few buffalo traces and navigable rivers (like South Bend). Modest cities formed, but nothing big enough to be permanent like the great European, African or Asian cities.

By the 1880s, through war and peace, populations grew beyond the limit of the land to sustain them. The modest Revolutionary Land Grants were now split among great-grandchildren and were no longer large enough to allow the new generations to prosper. At this charmed moment, the industrial revolution moved to the Midwest.

Now, popular lore has it that the factories came to exploit natural gas (Muncie or Gas City) or to be along rivers or roads. But that isn’t really why the Midwest industrialized. In fact, factories came to Indiana because it possessed one truly great asset—people.

The teaming mass of farm lads offered factories exactly what they needed at the time. Indiana invested in local schools and most kids attended through 8th grade. The data aren’t perfect, but I suspect that Indiana was universally literate before Great Britain. These farm-bred men and women could write, calculate and solve engineering problems ranging from irrigation ditches to hit-and-miss engines. They could build barns and maintain wagons, harnesses and tools. They knew how to work and work with others. By 1910, the Midwest was a goldmine of people and saw more growth than the world has ever before or after observed. As an example, Detroit grew from just over a quarter million to 1.4 million residents in 20 years. That same dynamic repeated itself across the Midwest.

A cultural example comes from the PBS series Downton Abby. Readers who enjoyed the show will recall that the financial savior of the family was an American heiress from Cincinnati. To Edwardian England, the American Midwest was a place of boundless wealth and opportunity. They were right.

Urbanization in the Midwest is really only two centuries old. The cities that came before are gone, and we will doubtless lose some more over time. But, in many ways, this is a unique place. Unlike Europe, Asia or Africa, where cities formed around seaports or strategic locations for national defense, here in the Midwest it was always really about the abundance of people.

From the late 1890s through the 1930s, the vast industrial revolution ran short of people. So, they imported them from Europe and Kentucky and Alabama. This continues as we import folks from Asia, India and South America. Still today, it is all about people.

This history has unique relevance today because we are again realizing that people are the most consequential element of economic growth. Government policies that embrace market economies are important, but in the end it’s about people, and their creativity and skill and abundance. Only places that recognize this truth, and invest in these efforts, will prosper.

Michael J. Hicks, PhD, is the director of the Center for Business and Economic Research and the George and Frances Ball distinguished professor of economics in the Miller College of Business at Ball State University. Hicks earned doctoral and master’s degrees in economics from the University of Tennessee and a bachelor’s degree in economics from Virginia Military Institute. He has authored two books and more than 60 scholarly works focusing on state and local public policy, including tax and expenditure policy and the impact of Wal-Mart on local economies.

Ball State CBER Data Center (cberdata.org) is a product of the Center for Business and Economic Research at Ball State
University. CBER's mission is to conduct relevant and timely public policy research on a wide range of economic issues
affecting the state and nation. Learn more.